The report and trend analysis below was prepared by Sebastian Lambert, CEO of FinancesOnline and our company’s guru on SaaS growth hacking and lead generation strategies. All trends are based on both extensive research of external sources as well as Sebastian’s analysis of SaaS-related data from FinancesOnline users and clients.

2017 will be remembered as the year of ultimate state-of-cloud performance for software providers, narrowing down the list of market opportunities to a single rule: no SaaS, no revenue! While observing how complex data machines shift smoothly towards online operations, we can’t do much but wonder which global trends in SaaS we are about to witness. In this article Sebastian Lambert will take a look at:

According to Cisco’s Global Cloud Index for the period 2013-2018, 59% of all cloud workflows will be delivered as software-as-a-service (SaaS) by the end of this year. An even braver prediction is that Infrastructure-as-a-service (IaaS) will drop down to 28% compared to the overwhelming 44% in 2013, and that only 13% will remain for workloads delivered as Platform-as-a-Service(PaaS).

Why do companies decide for SaaS?

All around us, we see companies turning into cutting-edge, SaaS exclusive powerful corporations, and the reasons for that are pretty self-explanatory. With more than 80% of their performance app being hosted and maneuvered in cloud, companies can confidently claim that their operations no longer depend on legacy systems. This makes absolute sense for all of them, are SaaS benefits often come down to serious financial savings. The main beneficiaries, as expected, are small and medium businesses, which also have the best growth forecasts for 2018.

The affordable price of SaaS technology helps expand the corporate ecosystem with a number of new apps, and involve everyone on board in how those apps are managed and operated. Since SaaS applications are easy to use, managers will no longer have to provide expensive training to enable employees to use them, and they won’t buy special devices for them as data resides entirely online. Better yet, these apps connect easily with a number of third-party apps and solutions, and usually come with open API access to enable you to build custom connections, which leads them to even better growth forecasts than the ones reported in our 2017 SaaS industry market report.

In short, businesses are shifting their operations to cloud because:

It costs less compared to their legacy systems

It cuts their operational costs

It enables them to maintain a consistent working process

It enables collaboration in large and decentralized teams

It saves the time needed for setup and training

It facilitates access to data

It is mobile-optimized, and independent from the devices they’re using

It becomes easier to connect applications with each other

It reduces (or eliminates) the burden of upgrading, maintenance, and safeguarding data

It keeps them in line with trends

In this SaaS industry market report, we will give a look to the leading SaaS achievements that marked 2017, and observe in brief the changes and improvements predicted for 2018.

5 Things that shaped the SaaS market in 2017

According to a popular Cisco survey, 83% of the best-performing US businesses planned a SaaS strategy and considered collaborating with cloud service vendors in 2017. Interestingly enough, 70% of them had no such intentions in 2016.

While one may argue the shortage of upfront costs as the main factor for such decisions, facts reveal that it was data security that drove enterprises out of their comfortable, local hosting shells. To start with, they were attempting to overcome organization-wide confusions and seemingly unconnected deeds of their IT departments, looking for solutions that can work anywhere, and for everybody. To be frank, a SaaS app may not cause sudden alignment in all goals, but will certainly make it clearer who is supposed to do what.

The most important thing SaaS technology will let you do for your IT department is to take the security burden off their shoulders, and transfer it to the entity paid to maintain it – the app’s provider. It comes without saying that this is the most important decision you will ever make, and that you must make a detailed research before you entrust your data security details.

2. The era of BYOD (Bring-Your-Own-Device)

BYOD may with confidence become an alternative name for SaaS as such, with a market proud to have reached a head-spinning $181 billion in 2017. The global trends of cloud hosting made it possible for businesses to become independent from shared working spaces and fixed hours, and to outsource operations by simply deciding to do so. In a prominent Microsoft report we found out that 67% of US employees acknowledged the benefits of using corporate data from their own devices, and managed to secure significant savings for their employers while remaining absolutely flexible. The problem of tracking performance got out of the way unnoticed, thanks to a number of excellent monitoring apps which are, as you guess, cloud hosted.

So, did it make sense to enable access to confident data on, so to speak, every device out there? As big as the perils we fear of may be, we can’t neglect the advantages of letting data run freely across the team – a problem SaaS apps solve with dedicated roles and permissions. Many companies found this motivating to develop a confident data storing policy and disable users from accessing info in insecure environments, a safeguard they’d never have considered in the comfort of their offices.

Speaking of the BYOD approach, we should also come back to company culture and why SaaS matters to it. Thanks to the use of unified cloud solutions, companies are able to standardize diverse business processes and ensure absolute transparency and compliance. This claim is quite ambitious, but also pretty realistic, keeping in mind that IT teams are now enabled to combine productivity solutions with discovery apps, and build up a modus operandi that will hardly ever fail to produce results.

3. The end of the Vertical vs. Horizontal battle: Custom integrations for everybody

2017 was also the year when software developers understood it made no sense to produce systems that master a single operation, and not even such that cater to the needs of only one specific industry. Many experts will agree that the days of vertical software are long gone; to the benefit of do-it-all applications everybody needs. SaaS is, as they like to put it, neither vertical- nor horizontal-friendly. It is way better than both, and that’s what makes it successful.

What does this mean? SaaS applications are targeted but not industry specific; and they are built to integrate with a large number of third-party solutions. Open API access for developers and non-experienced users is no longer a luxury – it is an important criterion without which purchasing a solution makes absolutely no sense. Popular brands that adopted this fundamental model at the dawn of its development are now generating millions of dollars, thanks to the do-it-all concept as seen in Zapier.

Therefore, before you purchase a SaaS system, make sure it is able to integrate with your existing business solutions, and that you cans also make it work in synergy with homegrown and legacy systems in your company. Open connectivity is also a bit tricky, so make sure your data will be protected and safeguarded on several instances.

4. The benefits of XaaS and pay-as-you-go models

In 2017, SaaS turned out so good that it overcame its own achievements, and introduced us the XaaS Everything-as-a-Service model. What this means is that an enormous number of vendors adopted modern technologies to be able to provide cloud services, and ensured that almost every operation can be completed online, and without installing any particular product. Most of them also enforced pay-as-you-go models to scale their service to the needs of different users, and expanded their reach to clients that would definitely be out of their target zone without this cloud facilitation. In a nutshell, XaaS appeared as a result of SaaS’s attempts to unify product development with service delivery, quality assurance, and engineering.

Thanks to XaaS, customers find it easy to modify their subscription terms and to upgrade their accounts; to add features, products, or services at any time; and to count on always-available disaster recovery plans for their sensitive data circulating in the cloud. Operability has become device-agnostic, and information is made accessible on all locations, and at all instances. Another benefit is familiar navigation and minimized design that brings technology closer to inexperienced users, and that is finally ensuring some type of consistency in the B2B industry.

According to IBM specialist Taymour El Erian, SaaS is not the founding merit for the emergence of XaaS, but an integral part of a much larger service landscape. As he explains, XaaS doesn’t only refer to service delivery models in cloud computing, but pretty much to delivering any virtual or physical resource. He mentions three core parts of the XaaS model: Platform-as-a-Serive (PaaS; infrasructure components for operating systems); Infrastructure-as-a-Service (IaaS; dev-friendly IT components for networking, storage, and security); and good old SaaS that supplies commercial and non-commercial applications.

5. The unparalleled impact of spotless customer experience

According to a recent Zendesk study, delivering functionality in cloud boosted customer satisfaction for almost 28% in 2017. Following a positive navigation experience, 62% of B2B buyers stated they’re only interested in purchasing SaaS technology. This may as well be the crucial motif for businesses to invest in systems of this kind, given that a 5% growth in their customer retention rates may lead to even 95% bigger revenue, as suggested by Earl Sasser from the Harvard Business School.

It makes sense to use an interactive app, doesn’t it? The customer-centric approach became the trademark of the SaaS industry, allowing end-users to perform custom actions at all times, and against minimal intervention by the provider. Better yet, custom actions were subjected to all sorts of performance analyses, unlike reports from the past that relied entirely on generalized assumptions.

Why are SaaS applications the preferred choice of end-users? To start with, they reduce the burden of installing and adjusting systems until they blend within one’s software landscape, and usually require minimal to no maintenance at all. With some providers, system updates are automated and due to a single-click approval, which puts a user in control without asking him to undergo complex verification processes. All along, the user rests assured that his data is bulletproofed and impossible to intersect by unauthorized entities; and enjoys the benefit of accessing it any time he wants, from any device he has available. The delight, however, goes both ways: With a remote, large, or decentralized teams to run; and a shaky reputation to maintain, enterprises couldn’t be more interested in purchasing SaaS technology.

What is going to be the key trend in 2018?

I think none of us will be surprised by the increasing role of Artificial Intelligence and Machine Learning solutions in 2018. More and more SaaS products adopt these tools and I’m certain it will have a disrupting influence not only on the SaaS market but on the way we do business in general.

As the costs of implementation get lower more SaaS vendors will benefit from the advantages offered by AI and ML solutions. Data analysis is, after all, one of the key areas in SaaS technology and artificial intelligence will allow for effective processing of amounts of data that wasn’t possible a few years ago. This may lead to a true marketing revolution as AI can be (and in many cases already is) creatively used in such areas as dynamic pricing, automated A/B testing, intelligent chatbots or predictive analysis. It looks like machine learning may become the battlefield for leading SaaS brands very soon.

What to expect from the SaaS market in 2018?

A genuine possibility for SaaS to dominate the tech market

A SaaS-exclusive tech market has never been more real than now, which gives us grounds to believe that the majority of leading systems and applications will receive their cloud versions in 2018. Meanwhile, the market will welcome the emergence of cloud-only services and applications, and accentuate the need for traditional frontrunners to sharpen their weapons for confrontation.

The distinctive advantage of SaaS technologies compared to in-office installations is their applicability on mobile devices. According to Statista, more than 60% of the population in the world in 2016 owned and actively used a smartphone, and researchers are confident that this number will increase by at least 1/3. The logical consequence of a mobile-overwhelmed society is that users are becoming significantly intolerant to poor mobile experience and lack of native apps, and even 61% of them will likely abandon a site they don’t find responsive enough. For SaaS apps developed primarily with mobile users in mind, this won’t be much of an issue.

DaaS evolution to the benefit of more strategic decisions

DaaS stands for virtual desktop infrastructures where information is handled, secured, and distributed by third parties, but still open to processing on the user’s end. Entrusting services to third-party vendors was found by many companies to be the more cost-effective option, particularly when compared to the practice of entrusting data management to busy IT teams.

Therefore, DaaS is another trend that won’t pass unnoticed in 2018, and a market that is about to witness a dramtic growth. What these applications aim to do is to foster smarter and more strategic corporate decisions by supplying company users with considerable chunks of cloud-based data. Access will be facilitated, and costs will be minimal, which is why experts set DaaS to grow by 23% in the upcoming years, and reach an incredible spending of $48.6 billion per year.

Enterprises will be employing DaaS systems more actively in order to track their clients’ needs in a more time- and cost-efficient manner.

Trading humongous products for standalone features

Unlike on-premise and humongous solutions where everything boils down to the product, SaaS systems are flexible and allow users to combine features and functionalities in a variety of ways. More features, tools, widgets, and layers are added on daily basis, with developers getting inspired mostly by on-dot customer necessities.

In 2018, outdated product marketing strategies will very likely be replaced by new-age feature marketing ones, all in the service of efficient targeting and customer engagement. Systems will become more flexible and open to all sorts of custom manipulations, probably letting companies build up personalized apps on a common basis, and at a fraction of the price. Better yet, open API architectures will enable connectivity against minimal coding, which will more or less mean that any app can work in any software ecosystem. Once the time to upgrade has come, managers will be relieved from investing scandalous amounts in profy versions they don’t need, as they can pick the exact functions they want, and build up their own offering.

Sophisticated and ‘human’ marketing of SaaS applications: A leading role for artificial intelligence and machine learning

Developers of modern SaaS products settle for nothing less than highly interactive marketing, reaching out to international audiences and carefully selected markets. Capturing customers’ attention with their ‘use it since day one’ mantra, SaaS systems generate far more organic traffic than traditional service providers, despite of the fact they promote no substantial difference in functionality.

In a nutshell, SaaS providers will pursue new channels and add up branding capabilities so that the user feels welcomed and assisted at all times. For instance, HubSpot reports that 95% of B2B companies are already using videos to improve their marketing strategies, 73% of which confirmed it had to do with their increased ROI rates.

Another important thing SaaS providers are expected to do in 2018 is to acknowledge even more the power of artificial intelligence and machine learning, and apply both in their promotional strategies. They are placed in the very core of an ongoing marketing revolution, producing practices that may prove, per se, more beneficial than relying on years of good old reputation.

How do end users benefit in the case? Amid their attempts to make UX unimaginable without interactions, SaaS providers will be lowering the barriers and reducing the costs of AI for an ordinary user, as they run fundamentally on data, and operate by processing massive chunks of it. For starters, ‘the most affected’ fraction will be business intelligence users, which will manipulate information they never stored in local databases at the first place. In 5 to 10 years, on average, AI will be an integral component of B2B marketing.

Enhanced investment in the SaaS industry

The annual growth rate of most successful SaaS vendors is a steady 30%, which put alone says enough on why investors are looking their way. Unlike 2013, when a SaaS-exclusive workplace was the blurry, undefined idea of only 40% of US companies, 2018 will open up a market of 60%+ enterprises ready to go to cloud, and even readier to pay for it.

Indeed, software vendors have reached the so-desired billion net worth in tech, and the running train is not about to stop. An array of venture capital companies have officially declared their intention to invest in SaaS technology, and those intentions are driving an influx of fresh ideas that will certainly improve the looks of our 2018’s software landscape. With the right sales teams and marketing strategies, no innovative SaaS vendor in 2018 will struggle to get the necessary funding. The funding explosion will very likely pull through in 2019.

Bottom line

SaaS technology has more to offer than we could possibly refuse, and is slowly overtaking the leadership position in the B2B worlds. In 2017, it embraced its old good habits of modernized marketing, mobile functionality, and unobstructed customization to attract even those users who’re not intimidated by on-premise prices and complex installations.

In 2018, logically, it takes no guesswork to depict the consequences of such SaaS revolution. More and more successful companies will embark on the SaaS ship to get some of the ‘full SaaS workspace’ we promoted, dragging back or replacing entirely the thousands-heavy on premise package they purchased in the past. Meantime, the growing demand will motivate powerful investors to fund important technological innovations, which means that a SaaS utopia may not be as far away as we think.

One of the ongoing trends in 2018 will be the growing importance of user reviews and review platforms in general as one of the key sources of lead generation for SaaS and B2B markets. If you’d like to find out how you can leverage user reviews to boost your lead generation efforts read our guide:

What trends do you think will shape the world of SaaS in 2018?Share your ideas with us in the comments below.

We will include all insightful opinions when we prepare an update for this article soon.

2 Comments »

Juliet Fostersays:

Except for BYOD, all these SaaS-IaaS-XaaS-PaaS techno-talk will remind all active businessmen and techies who have lived through a good part of the 80s, 90s, and early 00s of the old villains: interoperability, incompatibility, and modularity issues. While we have modern terms for a variety of their incarnations, interoperability and modularity remain at the heart of everything that matters in the software industry now.

I could fondly recall how users refined and honed their cursing skills every time they discovered their latest software update was no longer compatible with the older version they just discarded, and more so with software not remotely associated with their company’s vendor of choice.

Today, mention Open API and you have almost all of these magically vanquished in an instant. How times changed. And not.

But many businesses will definitely shiver at the mere thought of allowing BYOD in their business premises. And we really have to wonder why, given the fact that any miscreant with an evil persona will just as easily cart away critical information on premises if he or she is up to it, cloud or no cloud.

The reality is no data is ever safe, now, if someone is really after it. Just ask Pentagon about it. AI and quantum computing will probably have that area covered, but right now it is what it is. And SaaS data vendors do implement the strongest protection around for a fraction of a cost doing it in-house. And their policy of redundant, recoverable date is more stringent than most companies could do them, and the beauty of it all is you have the insurance of someone answering to your misfortune, no matter how distant it really is nowadays.

It would be extremely interesting at this point to ponder how the recent Facebook-Cambridge Analytica uproar and the ongoing spotlight on fake news threatening the political life of nations would play out in the field of data mining and AI integration.

While many of us would hail the growing power of AI to help the global economic outlook, it cannot be ignored that this immense development is also fraught with other implications that are making many sections of society nervous by the minute.

As complex algorithms embedded in Alexa, Siri, Tay/Cortana, Google/Alpha Zero and so on promise unheard of returns in sorting out current difficulties in multiple economic processes as well as going to territories we have never thought of before—AI, for example, already shows such genius finding relationships among many variables sitting unnoticed in our formidable databases—we wonder if perhaps policy makers would soon be at the door and steering data mining activities down the road that telemarketing took some decades back: legally conscripting companies to delist people who explicitly demand it, with clearly defined punitive actions awaiting transgressors.

Perhaps it is just as well, but I don’t see a development like this really denting the growing role of AI and automation in SaaS and many other industries. All these relentless developments point to a definite time when our technologies will finally know us better than we do ourselves and if we are positive about it, we are looking at socioeconomic realities more akin to how Asimov would have seen it: we will always be incorporated in the system, but we can switch off any time our individual needs call for it. Notwithstanding the flayed nerves right now.

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